A manufacturing firm reports the following balance sheet balances: Inventories: Rs. 120 crore; Trade Receivables (Debtors): Rs. 80 crore; Trade Payables (Creditors): Rs. 90 crore; Cash & Cash Equivalents: Rs. 25 crore; Short-term Loans and Advances: Rs. 15 crore; Short-term Debt Borrowings: Rs. 50 crore; Provisions: Rs. 10 crore. What is the Core Working Capital of the business?

[ A ]Rs. 110 crore (Inventories + Debtors - Payables)[ CORRECT ]

[ B ]Rs. 90 crore

[ C ]Rs. 200 crore

[ D ]Rs. 60 crore

Takeaway

Option A is correct: Rs. 110 crore (Inventories + Debtors - Payables)

Derivation

While Net Working Capital (Current Assets - Current Liabilities) includes non-operating financial assets (like treasury cash) and financing obligations (like short-term debt and current maturities), Core Operating Working Capital measures the capital tied up directly in the core operating supply chain cycle: Core Working Capital = Inventories + Trade Receivables - Trade Payables = 120 + 80 - 90 = Rs. 110 crore. This isolates pure operational working capital requirements without distortion from cash holdings or short-term loan financing. This tests working capital metrics. The primary trap is including cash or short-term debt in core working capital.

Why the others fail

B — Rs. 90 crore

Rs. 90 crore results from incorrectly deducting cash of Rs. 20 crore from the operational core working capital.

C — Rs. 200 crore

Rs. 200 crore represents gross operating assets (Inventories + Debtors) without deducting trade credit from suppliers (Payables).

D — Rs. 60 crore

Rs. 60 crore is derived from an incorrect calculation mixing short-term debt into operational supplier payables.